Synergy Pharmaceuticals – Plan Filed

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February 28, 2019 – The Debtors filed a second Amended Plan and a related Disclosure Statement [Docket Nos. 474 and 476] and also filed redlines of those documents showing changed from versions filed on January 24 [Docket Nos. 475 and 477].

As described further below, the two impaired (and entitled to vote) classes are expected to split $26.1mn of the "Excess Sales Proceeds" from the Debtors' approximately $200mn cash sale of substantially all of its assets to Bausch Health Companies Inc. and Bausch Health Ireland Limited (together, “BH” or the “Stalking Horse Bidder”).

The following is an updated summary of classes, claims, voting rights and expected recoveries (defined terms are as defined in the Plan and/or Disclosure Statement):

  • Class 1 (“Other Priority Claims”) is unimpaired, deemed to accept, and not entitled to vote on the Plan. Estimated Recovery is 100%.
  • Class 2 (“Other Secured Claims”) is unimpaired, deemed to accept, and not entitled to vote on the Plan. Estimated Recovery is 100%.
  • Class 3 (“Term Loan Claims”) is impaired and entitled to vote on the Plan. The estimated aggregate amount of claims is $37,105,161.21 and the estimated recovery is 35%. Each Holder of an Allowed Term Loan Claim shall receive: (a) first, its Pro Rata Share of the amount equal to 50% of Excess Sale Proceeds until the earlier of (i) payment in full of all Allowed General Unsecured Claims (including allowed post-petition interest, if any) or (ii)payment of $36 million of the Allowed Term Loan Claims (plus Term Loan Interest, if any); (b) second, if (i) occurs before (ii) as set forth in (a) above, its Pro Rata Share of 100% of the Excess Sale Proceeds until payment of $36 million of the Allowed Term Loan Claims (plus Term Loan Interest, if any); and (c) third, after (i) payment in full of all Allowed General Unsecured Claims (including allowed post-petition interest, if any) and (ii) payment of $36 million of the Allowed Term Loan Claims (plus Term Loan Interest, if any), its Pro Rata Share of the amount equal to 50% of Excess Sale Proceeds until all Allowed Term Loan Claims (plus Term Loan Interest, if any) are paid in full. 
  • Class 4 (“General Unsecured Claims”) is impaired and entitled to vote on the Plan. The estimated aggregate amount of claims is $38,600,000 and the estimated recovery is 34%. Each Holder of an Allowed General Unsecured Claim shall receive beneficial interests in the Litigation Trust entitling each Holder of an Allowed General Unsecured Claim to receive its Pro Rata Share of any recovery from Causes of Action or Avoidance Actions that vest in the Litigation Trust on the Effective Date in accordance with Section 5.03 of the Plan and: (a) first, its Pro Rata Share of the amount equal to 50% of Excess Sale Proceeds until the earlier of (i) payment in full of all Allowed General Unsecured Claims (including allowed post-petition interest, if any) or (ii) payment of $36 million of the Allowed Term Loan Claims(plus Term Loan Interest, if any); (b) second, if (ii) occurs before (i) as set forth in (a) above, its Pro Rata Share of 100% of the Excess Sale Proceeds until all Allowed General Unsecured Claims (including allowed post-petition interest, if any) are paid in full; and (c) third, its Pro Rata Share of the recoveries from the Litigation Trust, if any, until such Allowed General Unsecured Claim (including allowed post-petition interest, if any) is paid in full.
  • Class 5 (“Section 510(b) Claims”) is impaired, deemed to reject and not entitled to vote on the Plan. Estimated Recovery is 0%.
  • Class 6 (“Intercompany Claims”) is impaired, deemed to reject and not entitled to vote on the Plan. Estimated Recovery is 0%.
  • Class 7 (“Intercompany Interests”) is impaired, deemed to reject and not entitled to vote on the Plan. Estimated Recovery is 0%.
  • Class 8 (“Interests”) is impaired, deemed to reject and not entitled to vote on the Plan.

Subject to Bankruptcy Court approval of the sale of substantially all of the Debtors’ assets to the Stalking-Horse Bidder…the Debtors’ estimate that there will be approximately $26.1 million of Excess Sale Proceeds, which under the Plan will be split on a 50-50 basis between the Holders of Allowed Term Loan Claims and Holders of Allowed General Unsecured Claims. Accordingly, each Holder of an Allowed Term Loan Claim will receive its Pro Rata Share of a total of approximately $13.05 million to be distributed to Holders of Allowed Term Loan Claims and each Holder of an Allowed General Unsecured Claim will receive its Pro Rata Share of a total of approximately $13.05 million to be distributed to Holders of Allowed General Unsecured Claims. Any recoveries from the Causes of Action and Avoidance Actions vested in the Litigation Trust will be distributed pro rata to Holders of Allowed General Unsecured Claims until all Allowed General Unsecured Claims are paid in full. After all Allowed General Unsecured Claims are paid in full, any recoveries from the Litigation Trust will be shared ratably between Holders of Allowed Section 510(b) Claims until paid in full and Holders of Allowed Interests in Synergy Pharmaceuticals. Any recoveries from the Causes of Action and Avoidance Actions that vest in the Litigation Trust will be distributed pro rata to Holders of Allowed General Unsecured Claims until all Allowed General Unsecured Claims are paid in full. After all Allowed General Unsecured Claims are paid in full, any recoveries from the Litigation Trust will be shared ratably between Holders of Allowed Section 510(b) Claims until paid in full and Holders of Allowed Interests in Synergy Pharmaceuticals.

The Disclosure Statement attached the following Exhibits:

  • Exhibit A: Second Amended Joint Plan of Reorganization of Synergy Pharmaceuticals Inc. and Its Debtor Affiliate
  • Exhibit B: Hypothetical Liquidation Analysis
  • Exhibit C: Settlement Term Sheet

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